Published on June 29th, 2016 | by Zachary Shahan1
Sungevity Joining Stock Market, via Easterly Acquisition Corp.
June 29th, 2016 by Zachary Shahan
Given that the top 4 US rooftop solar installers are now on the stock market, it was expected that #5 Sungevity would also be joining at some point — well, it has been expected longer than some of those companies have been on the stock market. Sungevity just released news that it is indeed joining the NASDAQ … but in a less conventional route. There will be no Sungevity IPO. Sungevity is merging with Easterly Acquisition Corp. to join the NASDAQ.
Here are some of the key bits of info about the transition, from a press release sent to CleanTechnica:
Pursuant to the transaction, which is subject to customary closing conditions and approval by Easterly and Sungevity stockholders, all of the outstanding equity and convertible debt of Sungevity will be converted into shares of Easterly common stock. Upon completion of the transaction Easterly will change its name to Sungevity Holdings, Inc. (“Sungevity Holdings”) and will trade on the NASDAQ stock exchange under the ticker symbol SGVT.
Sungevity’s management team will remain with Sungevity Holdings under the leadership of current Chief Executive Officer and Co-Founder, Andrew Birch. Sungevity Holdings’ board of directors will be composed of members from the current boards of both Easterly and Sungevity.
I asked a Sungevity representative why the company didn’t join the stock market through an IPO, and he responded:
I think you know that Sungevity has never shied away from being different in our sector.
This path makes sense for us because it’s very much in line with the way we scale our business through best-in-class strategic partnerships. We recognize Easterly as a great steward of public capital and they have a track record to prove it. In turn, they recognize our relentless focus on providing an exceptional customer experience — how important that is as our industry enters the next phase of growth – and our use of technology to build an asset-light, nimble and sustainable business model.
Indeed — Sungevity has been a bit different from the other top solar installers in its tech approach, advertising approach, political activism approach, and I think sales approach. The tech and soft-cost advantages of Sungevity’s satellite-based iQuote system, as well as some of those unique ways Sungevity has approached its role in society, have long made Sungevity the home solar installer I’m most interested in investing in. Its expansion into Europe is enticing on that front as well. (For more on all of these matters, see my 2014 article after interviewing CEO & Co-Founder Andrew Birch: “Solar 2.0: A Talk With Sungevity CEO Andrew Birch.”)
It’s clearly a bit of an uncertain time in the solar stock market (in no small part due to the potential Tesla acquisition of giant SolarCity, but also because of SunEdison’s recent bankruptcy and its connection to Vivint Solar, and a general tumble in solar stocks and the stock market as a whole). So, I’m not quite certain what I will personally do, but I am still a fan of Sungevity’s approach to the business. Here’s a bit more of a summary on that from the company’s latest press release:
Sungevity helps homeowners and businesses in the U.S. and Europe reduce their cost of electricity through the sale of clean energy systems. The company focuses on high-value business components in-house, including software development and customer relationship management, and outsources functions requiring significant investment in assets to a curated ecosystem of lead generators, resellers, installers, financiers and supply chain partners. The result is an asset-light, sustainable business model that is scalable, thrives on relatively modest levels of capital and enables a path to profitability and cash flow generation. This stands in sharp contrast to the capital-intensive, asset-driven and vertically integrated model now ubiquitously deployed in today’s downstream solar market.
“We have always considered ourselves to be the ‘disruptor’ within a disruptive industry,” said Andrew Birch, Sungevity’s Co-Founder and Chief Executive Officer. “Easterly’s management has a track record of bringing innovative, growing companies to public shareholders and we expect that our merger will enhance our ability to innovate and grow as we strive to provide the highest customer experience to our expanding customer base.”
Sungevity Business Model Highlights
- In-house focus on value-added services: proprietary software development, design & engineering, quality control and customer-service.
- End-to-end customer solutions through a network of best-in-class third parties for asset-intensive functions: hardware, installation and project finance.
- Encourages system purchase, but offers all finance options for loan, lease, or power purchase agreement.
- Asset-light business model with relatively modest working capital needs, designed to enable path to sustainable profitability and strong cash flow.
- Has grown deployments at a compound annual growth rate of 76 percent over five years.
And here are more details on the financial transaction side of things:
Under the terms of the definitive agreements for the transaction, at closing, the following will occur:
- Sungevity’s existing stockholders will roll over all of their existing equity into Sungevity Holdings and, together with Sungevity’s management, retain approximately 58.8 percent ownership, assuming no redemptions by Easterly’s stockholders.
- It is estimated that the $200 million contained in Easterly’s trust account, less fees and expenses and amounts distributed upon redemption of shares of Easterly common stock, will be used following the closing by Sungevity for its business operations and will remain on its balance sheet.
- The anticipated initial implied market capitalization, including fees and expenses, is estimated to be approximately $607 million, assuming no redemptions by Easterly stockholders.
The transaction has been unanimously approved by both boards of directors of Easterly and Sungevity, and is expected to close in the third or fourth quarter of 2016, subject to all requisite regulatory approvals, approval of the stockholders of each of Easterly and Sungevity, and other customary conditions, including Easterly having available cash of at least $75 million. The description of the transaction contained herein is only a summary and is qualified in its entirety by reference to the definitive merger agreement relating to the transaction, a copy of which will be filed by Easterly as an exhibit to a Current Report on Form 8-K.
Hogan Lovells US LLP provided legal counsel to Easterly and Orrick, Herrington & Sutcliffe LLP acted as counsel to Sungevity.
High finance and the workings of the stock, admittedly, are not my forte, and I am still not sure what the fully story is on Sungevity going this route to market rather than through an IPO, so if more experienced investors and armchair (or professional) financial services experts are interested in providing some context and musings, I’d love to read them in the comments, and I am sure other CleanTechnica readers would as well. Dazzle us!